Commercial Real Estate Glossary — Texas

Plain-language definitions of common Texas commercial real estate terms

Prepared by Prasla Law Firm PLLC · Greater Houston, Texas

How to use this glossary

Commercial real estate in Texas comes with its own vocabulary, and terms often mean slightly different things in commercial transactions than they do in residential sales. This glossary defines the terms that come up most often in acquisitions, dispositions, and leasing for small and mid-market Texas deals.

Each definition is a starting point. Every transaction has its own facts, and contract language controls over generic definitions. When a term matters for your deal, have counsel review the actual contract provision.

Terms

1031 Exchange

A tax-deferral strategy under Section 1031 of the Internal Revenue Code that allows an owner selling qualifying real property to defer capital-gains tax by reinvesting the proceeds in "like-kind" property within strict time limits. Requires a qualified intermediary, specific identification and closing deadlines, and careful structuring. Tax rules are technical — consult a qualified tax advisor.

ALTA Survey

A land survey prepared to the detailed standards set jointly by the American Land Title Association and the National Society of Professional Surveyors. Commercial lenders and title insurers typically require an ALTA survey before closing because it reveals encroachments, easements, and boundary issues that a basic tax survey would miss.

As-Is Clause

A contract provision stating that the buyer accepts the property in its current condition without seller warranties of quality. "As-is" does not eliminate the seller's obligations regarding fraud or undisclosed known defects, and Texas courts interpret specific contract language carefully.

Assignment

The transfer of a contractual right or interest from one party to another. In commercial real estate, buyers sometimes assign their rights under a purchase agreement before closing; tenants sometimes assign a lease to a new occupant. Most contracts and leases restrict assignment, often requiring landlord or seller consent.

Closing Statement

An itemized accounting of all debits and credits between buyer and seller at closing. Prepared by the title company or closing agent. Shows the sale price, prorations, credits, closing costs, and the net amount paid to the seller and due from the buyer.

Commercial Lease (Gross vs. Net vs. Triple Net)

A gross lease means the tenant pays a single rent amount and the landlord pays all operating expenses. A net lease means the tenant pays base rent plus one or more expense categories. A triple net (NNN) lease means the tenant pays base rent plus property taxes, insurance, and common-area maintenance. Which expenses actually count as CAM is negotiated and contract-specific.

Deed of Trust

The instrument Texas uses instead of a mortgage to secure real estate loans. Three parties are involved: borrower (grantor), lender (beneficiary), and trustee. If the borrower defaults, the trustee can foreclose non-judicially under Texas Property Code procedures.

Due Diligence Period

A negotiated window after contract signing during which the buyer investigates the property — title, survey, environmental, zoning, leases, financials, physical condition — and decides whether to proceed. In Texas commercial deals, the due-diligence period is often coupled with an independent contract right to terminate.

Earnest Money

A deposit a buyer puts into escrow at contract signing to signal commitment. In Texas commercial deals, earnest money is usually held by the title company. Whether it is refundable, and when it "goes hard" (becomes non-refundable), is negotiated in the contract.

Easement

A right to use a portion of another party's land for a defined purpose — driveway access, utility lines, drainage, shared parking. Easements run with the land and appear in the title commitment. Buyers should understand every easement affecting the property before closing.

Environmental Site Assessment (Phase I / Phase II)

A Phase I is a non-invasive review of the property's history to identify possible environmental concerns. A Phase II involves sampling and testing if Phase I flags issues. Most commercial lenders require at least a Phase I before funding.

Escrow

A neutral third party (typically the title company in Texas) that holds funds or documents pending satisfaction of closing conditions. Releases funds only when all contract conditions are met.

Estoppel Certificate

A signed statement from a tenant confirming key lease terms, rent paid, security deposit held, defaults (if any), and other facts as of a given date. Buyers purchasing leased properties require estoppels from tenants to confirm the leases are what the seller has represented.

Fee Simple

The most complete form of real estate ownership — indefinite in duration, transferable, and inheritable, subject only to government powers (taxation, eminent domain, police power) and any private restrictions of record.

Feasibility Period

See Due Diligence Period. The terms are sometimes used interchangeably in Texas commercial contracts; exact meaning depends on the contract language.

Ground Lease

A long-term lease of land (often 50+ years) where the tenant typically builds improvements at its own cost and owns them during the lease term. At lease end, the improvements usually revert to the landowner. Common in commercial development where the landowner does not want to sell.

Hard Earnest Money

Earnest money that is non-refundable to the buyer regardless of why the deal does not close, except for specifically preserved seller defaults. In Texas commercial deals, earnest money often "goes hard" at the end of the due-diligence period.

Letter of Intent (LOI)

A non-binding written summary of the principal deal terms the parties intend to negotiate into a binding contract. Typically identifies price, timeline, due-diligence scope, and key contingencies. Whether any provisions are binding (confidentiality, exclusivity, governing law) depends on the LOI's own language.

Mechanic's Lien

A statutory lien a contractor, subcontractor, or supplier can record against real property for unpaid labor or materials. Texas mechanic's lien procedures are highly technical; buyers should confirm no mechanic's liens affect the property before closing.

Option Period

A negotiated period during which the buyer has an unrestricted right to terminate the contract for any reason or no reason, often for a small additional payment. More common in Texas residential transactions than commercial, but sometimes negotiated in commercial deals.

Prorations

The allocation of recurring property costs (taxes, rent, utilities, CAM reconciliations) between buyer and seller at closing based on the closing date.

Purchase and Sale Agreement (PSA)

The binding contract between buyer and seller that governs the transaction. In Texas commercial deals, the PSA is typically heavily negotiated and much longer than the TREC-promulgated residential forms.

Restrictive Covenants / CCRs

Private restrictions on how real property can be used, recorded against the property and binding on current and future owners. Common in commercial parks, retail centers, and subdivisions. Buyers should review all recorded CCRs during due diligence.

Subordination, Non-Disturbance, and Attornment Agreement (SNDA)

A three-way agreement among landlord, tenant, and lender addressing what happens to a tenant's lease if the lender forecloses. Subordination makes the lease junior to the loan; non-disturbance protects the tenant from being terminated on foreclosure; attornment binds the tenant to recognize the new owner.

Survey (Category 1A)

The Texas standard commercial land survey prepared by a registered professional land surveyor to the Texas Society of Professional Surveyors Category 1A standards. Common in Texas commercial transactions alongside or instead of an ALTA survey.

Tenant Improvement Allowance (TI / TIA)

A landlord-provided budget for customizing leased space for a tenant's use. Typically expressed in dollars per square foot. Contract language controls how the allowance is paid out, what counts as a reimbursable improvement, and whether unused amounts are forfeited.

Title Commitment

A document issued by a title insurance company listing the conditions under which it will insure title. Shows the current record owner, the proposed insured, existing liens and encumbrances (Schedule B-1) and exceptions to coverage (Schedule B-2). Buyers should review Schedule B carefully.

Title Insurance

An insurance policy that protects against losses from defects in title that existed before the policy was issued but were not disclosed. Texas title insurance is regulated by the Texas Department of Insurance and premiums are set by regulation. REQUIRES VERIFICATION — confirm current rate tables at tdi.texas.gov before quoting specific numbers.

Triple Net (NNN)

See Commercial Lease. A lease where the tenant pays base rent plus property taxes, insurance, and common-area maintenance (the three "nets").

Zoning

Local government restrictions on how land can be used — residential, commercial, industrial, mixed-use — and how it can be developed (density, height, setbacks, parking). Zoning is set by the city or county. Confirming zoning permits the intended use is a due-diligence essential.

Still have a question?

Commercial real estate vocabulary runs deep, and the right term in the wrong context can cost money. If you have a term we have not defined, or want help applying one of these to your deal, we are happy to talk.

Schedule a consultation: 713-955-4045 · znp@praslalaw.com

The information in this glossary is for general educational purposes only and is not legal advice. Reading this glossary does not create an attorney-client relationship. For advice about your specific transaction, consult a licensed attorney.

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